Glossary Word Definition: Federal National Mortgage Association (FNMA or Fannie Mae)
Federal National Mortgage Association (FNMA or Fannie Mae)
Fannie Mae was incorporated in 1938. In 1954, under the Charter Act, Fannie Mae became a mixed-ownership corporation owned partly by private shareholders. In 1968, Congress split the original entity into two separate corporations: the Government National Mortgage Association (Ginnie Mae) and the Federal National Mortgage Association. Ginnie Mae is a wholly owned corporate instrumentality of the United States within the Department of Housing and Urban Development. The legislation enabled Fannie Mae to raise capital to repay the US Government's financial investment in the corporation. By 1970 Fannie Mae completed the transition and officially became a private corporation.
Fannie Mae's primary debt instruments - short-term notes and debentures - typically have offered 10 to 100 basis points more in yield than Treasuries of comparable maturity. There exists a liquid secondary market for short-term notes and debentures, aided by the large size of the individual debenture issues. Fannie Mae's debentures are unsecured general obligations of the corporation and do not contain provisions permitting theholders to accelerate their maturity. In most cases, interest payments are made semiannually.
Fannie Mae also supports the housing market by purchasing mortgages and, since 1981, by issuing and guaranteeing mortgage-backed securities (MBSs).
